The European Union’s budgetary process, like that of all states, is much more than just a simple accounting exercise aiming to match expenditures and revenues. It is a crucial political process that not only sets out policy objectives but also says something about what is the nature of the political community and what sort of future it wants to map out for itself.

The European Commission unveiled its map on 2 May in the form of the proposals for what is called the Multiannual Financial Framework (MFF), better known simply as the EU’s budget. It covers the period from 2021 to 2027, the first budgetary exercise in what will be the post-Brexit EU. Losing its third largest economy did not prevent the Commission from presenting plans to expand the budget to €1.279 trillion from €1.087, despite losing the UK’s €13 billion net contribution. The Commission not only planned to do more for a smaller EU, it also sought some major changes. The proposed budget seeks to slash 5% from agricultural programmes, which make up 40% of current spending as well as to reduce its structural funds that aim to reduce regional imbalances by 7%. It proposes to increase spending for immigration, controlling borders, student exchanges and research.

The proposal that received the most attention in some quarters was the plan to use the power of the purse to punish member states that deviate from the liberal democratic principles and practices that the Commission defines as essential terms of membership. The Commission proposes to withhold funding from member states that are found to have violated “core” European values. The move is clearly aimed at states, namely Poland and Hungary, that have recently been identified by the Commission as not necessarily respecting the rule of law.

The proposal is purposively not formally part of the Commission’s budget proposals for 2021-2027. Had the Commission decided to include the measure as part of the budgetary package, it would have been subject to unanimous approval as EU rules dictate that the MFF cannot be taken without the approval of all member states. Had the proposal been included in the budget, as it probably should have been, it would have surely been dead on arrival as, at the very least, it is unlikely that those member states that saw themselves as the intended target would have voted in favour of a proposal that would have penalized them. Not only Poland and Hungary would be wary of giving over such discretionary power to the Commission, especially as support for the EU is not running very high in some member states such as Italy.

As it stands, the plan to punish member states that run afoul of the Commission’s understanding of core EU values would need to be approved by 55 per cent of the member states (that is, 14 assuming it will come to a vote after the UK has left the Union) representing at least 65% of the EU’s population. It is not likely that threshold will be reached as we can assume that the government that is being formed in Italy is not likely to go along with the proposal and probably Austria would also not likely want to transfer more power to Brussels. More importantly, the budget proposals will require unanimity to be approved. It is likely that governments that feel threatened by the move to withhold funds if they are deemed by the Commission to be deviating from liberal practices and values will use their veto power to get the Commission and possibly other member states to back down. The proposal to punish member states using the power of the purse may be formally separate but it is very much part of the negotiations about the budget.

Finally, some of the governments that are the target of the proposed changes, such as Hungary, are in the same centre-right political party group in the European Parliament, the European People’s Party (EPP). This might explain why Germany’s Angela Merkel has been muted in response to allegations of illiberal democracy spreading to some of the member states governed by partners in the EPP. Politics, more than a commitment to European values, is likely to guide the member states in how they will decide to respond to the Commission’s proposals.

It is not likely that the proposal to punish some member states will be approved in the near future. The question, then, is why has the Commission proposed this now, knowing that it had little chance of success? We can propose a few reasons. First, the current European Commission led by Jean-Claude Juncker is on its last legs. Many of its grand plans and visions for major steps forward in integration have stalled or simply been ignored. The proposals might be a sort of swan song, a warning signal about the future of Europe if it deviates from the model developed over the last 70 years. Second, the proposal has the explicit support of some political leaders, such as the Liberals in the European Parliament and, to some extent, French President Emmanuel Macron. This can be read, in part, as political positioning in light of the elections to the European Parliament in May 2019. These centrist forces are trying to pry votes away from the traditional centre-right voters who might not want to be associated with regimes such as Orban’s as well as from the collapsing centre-left.

The Commission’s plan is not likely to be successful but this does not mean that it has not had and will not have consequences. It has only served to aggravate tensions between some of the member states without providing a way to forge a consensus about what it means to be European, about the nature of European integration and what kind of future for the Union the member states want to create. The EU’s budgetary process for the next few years has not got off to a good start.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.